Question

Assume that Chapman Company acquired Abernethy’s common stock by paying $520,000 in cash. All of Abernethy’s accounts are estimated to have a value approximately equal to present book values. Chapman uses the partial equity method to account for its investment. Prepare the consolidation worksheet entries for December 31, 2011, and December 31, 2012.Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2011. As of that date, Abernethy has the following trial balance:

During 2011, Abernethy reported income of $80,000 while paying dividends of $10,000. During2012, Abernethy reported income of $110,000 while paying dividends of$30,000.